pricing Flashcards
What are the internal factors affecting price decisions?
- Marketing objectives
- survival
- current profit max.
- market share leadership
- product quality leadership
- non profit/public organisation
- Marketing mix
- Strategy costs: fixed + variable
- Organisational considerations
What are the external factors affecting price decisions?
- nature of the market and demand (mkt structure)
- competition
- Other: economy, reseller needs, govt, social concerns
What is the Demand Curve and Price Elasticity of Demand
- demand curve: number of units mkt will buy in given time at different prices.
- price elasticity: Responsiveness of DD to change in price (% change in Qdd / % change in price)
What is the difference between cost-based and value-based pricing?
Cost: • product → cost → price → value → customers
• Adds a standard markup to the cost of the product → need: certainty about costs
• Simplest method, minimized price competition, fairer to buyers and sellers
• Ignores mkt demand & competition
Value:
• customer → value → price → cost → product
• e.g. Swatch, cheap watches $30 made in Switzerland
What is competition-based pricing?
- going rate: company set prices based on what competitors are charging
- sealed-bid: company sets prices based on what they think competitors will charge
What are the methods/strategies for new-product pricing?
- Market Skimming: set high price for new product to “skim” maximum revenues from target market
o fewer, more profitable sales
o must be high quality, cannot price too high to cancel advantage of charging more, competitors cannot enter market easily to undercut high price - Market Penetration: low price for new product to “penetrate” market quickly and deeply
o large number of buyers, large market share
o market must be price sensitive, production + distribution must fall as sales volumes rise
o maintain low price position
What is product mix pricing?
- Product line pricing: price steps between various products in a product line based on
Cost differences between products
Customer evaluations of different features
Competitors’ prices - Optional Product: optional accessory products sold with main product
- Captive Product: pricing products that must be used with main product (film)
- By-Product: Pricing low-value by-products to get rid of them and make the main product’s price more competitive.
- Product-Bundling: Combining several products and offering the bundle at a reduced price.
What is discount and allowance pricing?
- adjust basic price to reward customers for certain responses
- cash discount, seasonal discount, quantity discount, trade-in allowance
What is segmentation pricing?
• sell product at different prices even with no difference in cost customer segment, location pricing, product form time pricing
What is psychological pricing?
• Price becomes an important quality signal when customers can’t judge quality
What is promotional pricing?
• Special-event pricing, cash rebates, low-interest financing, longer warranties, free merch
What are public policy issues in pricing?
- Price fixing, predatory pricing (illegal), deceptive pricing to consumer, price discrimination
- resale price maintenance: manufacturer forcing retailers to charge a specified retail price for pdt
What does a price decrease signal to consumer?
Consumers: replaced by newer product current products not selling well company in trouble reduced quality
What are the public policy issues in pricing?
- Price fixing, predatory pricing (illegal), deceptive pricing to consumer, price discrimination
- resale price maintenance: manufacturer can’t force dealers to charge a specified retail price for pdt
What are the 9 types of pricing?
- cost-based
- value-based
- new product
- product mix
- discount and allowance
- segmentation
- psychological
- promotional
- competition-based
